# Exchange of Reserves When a trade is performed through a Virtual Pool, assets sold by the trader are placed into the *reserves* of the Active Pool. To ensure continuous operation of the reserve-based virtual pool system, and limit the risk for LPs, it is required that the reserves of the participating pools be periodically reduced in size or emptied and replaced with the pools' respective native tokens. VirtuSwap elegantly achieves this goal by allowing the pools to exchange reserve assets with other pools in the system. The reserve exchange routine is periodically initiated by the system to perform this. For each one of the reserve tokens (*Source Token*) held by a each pool (*Source Pool*) in the system, the routine looks for a *Target Pool* that complies with the following criteria: 1. The *Source Token* is a native token of the *Target Pool;* 2. The *Target Pool* holds a nonzero amount of reserves in one of the *Source Pool*'s native tokens. If such *target* pool is found, the exchange of reserves is performed according to the exchange rate in virtual pools constructed separately by each one of the two exchanging pools. For example, if the WETH-USDC pool is currently holding MATIC as reserve, the WETH-MATIC pool holding USDC in reserve is a good candidate for exchange of reserves. In this case, the MATIC-USDC price will be determined by a virtual pool constructed from WETH-USDC and WETH-MATIC pools. The exchange of reserves between two pools is done using a fixed rate, without an AMM curve and thus does not incur any price impact losses and does not introduce any additional imbalance into the system. By periodically performing the Reserve Exchange routine, the level of reserves in pools is kept low, enabling trading through virtual pools and reducing the risk incurred to LPs by holding non-native tokens in the pools. The matching between *Source Pools* and *Target Pools* is performed off-chain, while the execution of the actual exchange is done on-chain. See [`vExchangeReserves`](/virtuswap-documentation/technical-reference/smart-contracts-v1/dex-contracts/vexchangereserves.md) contract for more technical details. #### **Liquidation of reserves** In certain rare cases, it may occur that the reserves in one or more VirtuSwap pools get filled up, and cannot be exchanged for a prolonged period of time. For example, if everyone on the market is selling a particular asset and nobody is buying it, that asset may clog the reserves of one or more pools in VirtuSwap DEX and thus prevent them from accepting more reserves and construct virtual pools. In this case, the Admin or the EmergencyAdmin wallet designated by the DAO can step in and exchange the reserves with the pool at a discount, unclogging the reserves and allowing the pools to operate normally. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.virtuswap.io/virtuswap-documentation/virtuswap-basics/virtuswap-technology/exchange-of-reserves.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.